Cengage Full Fiscal Year Results Disappoint

Cengage Learning, the large privately held educational publisher, recently announced (PDF) disappointing full year 2011 financial results; but in their presentation, the company did endeavor to communicate how material their transition from a print centric to an electronic publishing will be for the company.

Leading with the good news, management focused on how much additional value Cengage will be able to extract from students purchasing their content once the material is available online. The company suggests that while prices for electronic content may be reduced, the penetration rate into the typical class will be significantly higher once that content is delivered electronically. For example, in a class size of 600 (over three years) the publisher may currently only sell to about 33% of students but, in the online scenario, the penetration rate could be 90%. As noted, while revenue is potentially higher, gross margin is markedly higher by about 10 percentage points (75% versus 85%) according to their example (slide 6).

Since Cengage was purchased from Thomson Reuters the company has been in a race to migrate and/or convert their content into electronic form. In this presentation management underscored some important milestones in that effort. Over 70% of their products now have an electronic component which is expected to rise to 75% by the end of fiscal 2012. Both sessions and activations are up in percentage terms but these stats are harder to place in context. The company also noted the recent acquisition of National Geographic School Publishing which now makes Cengage a leading English language provider in the US.

However, the discussion of the financial results was less positive. A weak third and fourth quarter resulted in a significant drop in top line revenue which has been attributed to timing of orders and the loss of some adoptions. Interestingly, the company also noted that the increase in textbook rental programs may also have adversely impacted their revenue. Cengage launched their own textbook rental program recently but Chegg will be the prime offender in this category.

Other areas of concern included lower gross sales in their career segment (reflecting sales made to career and vocational schools) and Research (Gale) which declined $25mm due to lower print and online sales.

In summary, the financial results were as follows:

Fourth Quarter:

($ Millions)	2011	2010	Change
Revenue	472.9 $	$ 553.4	(14.5)%
Adjusted EBITDA	$ 201.5	$ 234.0	(13.9)%
Margin	42.6%	42.3%

Full Year:

($ Millions)	2011	2010	Change
Revenue	$ 1,875.9	$ 2,017.6	(7.0)%
Adjusted EBITDA	$ 780.4	$ 840.1	(7.1)%
Margin	41.6%	41.6%
Capital Expenditures	252.5	203.0	24.4%
Unlevered Free Cash Flow	$506.7	$596.7	(15.1)%

For a full explanation of the results check the Cengage investor presentation here.

MediaWeek (Vol 4, No 33): The Chronicle of Higher Ed on the 10th Anniversary of 9/11

In advance of the 10 year anniversary of the 9/11 attacks The Chronicle of Higher Education has published a special issue that looks at a number of themes raised by the events of that day (Chronicle):

An Era in Ideas:

To mark the 10th anniversary of the September 11 attacks, The Chronicle Review asked a group of influential thinkers to reflect on some of the themes that were raised by those events and to meditate on their meaning, then and now.The result is a portrait of the culture and ideas of a decade born in trauma, but also the beginning of a new century, with all its possibilities and problems.

A sample From Memory by Lawrence Weschler:

Get a grip, I kept finding myself thinking, as the event grew ever more fetishized over the ensuing months—the gaping hole in the skyline acquiring an idol-like status, all political life (and prior common sense) seeming to get sucked into its yawning vortex. New York was not the first city that's ever faced a terrorist attack, I kept having to remind myself, nor the first city ever to have been bombed (hell, we ourselves, as Americans, had repeatedly bombed a good many of the rest of the world's cities).

Maybe it was just that we'd imagined ourselves immune from the forces impinging on other people's lives, immune from history (history previously being defined precisely as something we did to other people, not something they ever did to us); and now suddenly that old historical machinery was clanking away big time, the chains catching hold, and it didn't feel at all good.

Nor can it be said that, historically speaking, we went on to acquit ourselves with much distinction. Londoners during the Blitz had to endure this sort of thing day after day, for weeks on end, but they didn't crumple. Under Churchill's leadership, it was as if the more the Nazis threw at them, the greater their focus, the more uncanny their calm: Far from buckling, they bucked up.They retained perspective.

For when you're under murderous assault is precisely not the time to turn your entire political culture inside out. That's what the terrorists want you to do, that's what they are dying for you to do. But you're supposed to resist that temptation.

Here are links to the rest of the individual articles:

Sheldon Solomon: Death
Steven Pinker: Terrorism
Alex Gourevitch: Fear
Terry Eagleton: Evil Scott Atran: Enemies Victor Davis Hanson: Courage
Martha C. Nussbaum: Justice Todd Gitlin: Patriotism
Lawrence Weschler: Memory
Marjorie Perloff: Language
Richard Sennett: Cooperation
Barbara Frederickson: Resilience
Omid Safi: Tolerance

Ithaca McDonalds 1968

Ithaca McDonald's, August 1968

Another weekly image from the family archive. Click on it to make it larger.

My father attended summer school at Cornell's Hotel Management school in 1968 and one of his professors worked for Intercontinental. Long story short he suggested they hire him and later in 1968 the family left for the first assignment in Thailand.

In my first family trip to the US (Los Angeles) in 1976, I remember distinctly the itemized number of hamburgers served on the golden arches. I wish I had a comparison photo but I am certain it was ten times this number by then.

Flickr Set

In addition to the images I've posted on Flickr and those I've periodically posted on PND, I have now produced a Big Blurb Book: From the Archive 1960 -1980 of some of the images I really thought were special.

I now have an iPad version of this book for sale ($4.99) on the Blurb site which you can find here: STORE

I have to say, even on the iPad the book looks pretty good.

Beyond the Book with Elsevier's Rafael Sidi

From his beyond the book series, Chris Kennealy interviews Rafael Sidi, Elsevier VP of Product Management for Applications Marketplace and Developer Network.

“We are letting [researchers] play with our data and build on top of our data stuff that they need to build. In the end, scientists and researchers know their problem better than us.”

Sidi cited a variety of innovative application efforts, including for SciVerse, which offers developers access to Elsevier content, and the community driven projects Apps for Science Challenge and Apps for Library Idea Challenge. (Interview)

Some clips from the transcript of the interview:

So what we are trying to do with the data, we want to give access to our data as we’ve been giving, to make that data easily remixable, reusable among the developers. And wanting that, I’ve been saying that if we let the data to be used by the scientists, by the researchers within our environment, they are going to be able to create much, much better solutions. They are going to be able to create solutions that we couldn’t have imagined.

So what we are doing is just we are going to the crowd. We are letting them play with our data and build on top of our data stuff that they need to build, because at the end, scientists and researchers, they know their problem better than us, in some cases, and what we are doing, we are giving them the tools and we are providing the services for them in this application and developer network in our framework so that they can build using our services and tools.

....

Good question. What we are trying to do right now is to reach out to the community, to the crowd. We’ve been doing different challenges. I mentioned we had a challenge at Rensselaer Polytechnic Institute. Our first one was at New Jersey Institute of Technology. And what we are doing right now, currently we have two different challenges going on.

One, we call it Apps for Science. It’s a challenge among six countries where we are asking developers to submit applications and then we are giving them prizes. And the other challenge that we are doing among our librarians, Apps for Library. So we are asking to librarians to submit ideas. And we are going to – again, a judging committee is going to pick the ideas and then what we are planning to do, some of the ideas we are going to go to our developer network and develop, and those ideas are going to be developed by the developer network.

So, so far, we’ve seen an excellent biomedical image search application that is going to be built by the University of Madison, Wisconsin. So we are getting some ideas that we haven’t thought about it.Just recently, we launched a new app from a company called iSpeech and the app takes the text and then translates to words, so you can just hear the text. And that’s also very important for us in terms of accessibility to the content, making the content easily accessible to everyone. So I if I have an impairment, then I can listen to the text.

FT On Potential McGraw-Hill Break-Up

Reporting via mergermarket.com the FT suggests that the activist shareholders seeking to unearth greater value from their holdings in McGraw-Hill will face an up hill battle (FT).

McGraw-Hill has spent the last ten to twelve months receiving advice from a slew of media bankers, the industry bankers said. “Even if the activists have revolutionary ideas in mind, chances are it’s already been pitched to the management and considered under various scenarios,” the first of the bankers said.

And further comments on the education assets specifically:

McGraw-Hill has been receiving sales pitches for its education publishing assets, specifically its higher education textbook assets, the first and second bankers said.
These assets have drawn strong interest from financial sponsors like Blackstone and Hellman & Friedman and could fetch around USD 3.5bn in a sale, according to a lender following the situation. Both sponsors declined to comment.
Other sponsors with historical expertise in education include Bain Capital, KKR, Providence Equity Partners, and Warburg Pincus.
The approaches come as McGraw-Hill has been accused of being slow to respond to technology changes in the publishing business.
“They’re not playing in the back-office ERP (Enterprise Resource Planning) areas and student information systems that Pearson (PSON:LN) or GlobalScholar are playing in and that are higher growth margins,” said a third banker.
Pearson’s education sales jumped 7% and operating profit rose 16% last year based on public filings, meanwhile McGraw-Hill’s revenue and operating income for 2Q11 decreased 5.0% and 18.3%, respectively. Pearson, the owner of the Financial Times, is the parent company for this news service.
With McGraw’s education business not growing, it makes sense to consider a split of the business from the company’s profitable Standard & Poor’s ratings service, the industry bankers said.

More from the FT here.

MediaWeek (Vol 4, No 32) Digital Storytelling, Report on Graduate Earning Power, Citation of Wikipedia, Forsyth's Jackal + More

From the Observer: Storytelling: Digital technology allows us to tell tales in innovative new ways. As the tools available to publishers grow more sophisticated, it's up to us to experiment and see what sticks. (Observer)

But the tools they use to tell tales are evolving, becoming more modular and tailored, more participatory and more engaging than just the printed word or the moving image. The new form of storytelling that's coming from a digitally enabled cabal moves beyond reinterpreting a text for radio or screen. Some creatives have taken their inspirations from Kit Williams's 1979 picture book Masquerade, which motivated a generation of people to pour over symbols in illustrations to find a treasure buried in the Midlands, starting their stories anywhere – online or off. They weave narratives from seemingly innocuous blogs, magazine ads, TV slots, fashion labels and public phone calls. Clues in the alternate realities designed by authors are littered in the physical and the virtual; consumers simply need to be tuned in to see them, and willing to take part in the unfolding narrative.

Frank Rose, author of The Art of Immersion: How the Digital Generation is Remaking Hollywood, Madison Avenue and the Way We Tell Stories,believes this is exactly what people want from their story experience. "The kind of multi-way conversation that the web makes possible is what we've always wanted to do," he says. "The technology finally enables it."

Rose celebrates the way that the new kinds of storytelling brings audiences together to traverse plots, but recognises that there are challenges for consumers and for creators: "It's very different when you have a medium that forces you to engage with other people," he says, reflecting on the arc of a narrative that is necessarily more complex, multifaceted, and demands more flexibility. "You don't know if you're going to have to tell a story for one hour, two hours or 10 years."

Also more examples from the author's tumblr site.

Georgetown study looks at the earning power of graduates (InsideHigherEd):

The study, entitled “The College Payoff,” is the latest of a string of reports Carnevale’s shop has released that generally tout the benefits of college attainment. (This one was trumpeted Thursday at a joint news conference with the Lumina Foundation for Education, whose college completion push resonates with the Georgetown study.) For the report, the Georgetown researchers estimated the lifetime money-making prospects of various types of degree holders. To reflect contemporary circumstances, they extrapolated a 40-year career based on 2009 earnings data. Unlike previous studies with similar methodologies, the study used median estimates rather than averages.

Carnevale and his co-authors describe gender and race/ethnicity as “wild cards that can trump everything else in determining earnings.”

A man who drops out of college will probably earn about as much as a woman who graduates with a bachelor’s degree, the study finds. Under current conditions, men are projected to out-earn women over their lives at every level of college attainment. The greatest gap occurs at the level of professional degrees. The Georgetown researchers projected that women who get a professional degree will earn $3 million over their lives. That is more than $1 million less than a man with the same type of degree.

Thinking about Wikipedia as an authority (IHEd):

Not that a book consisting entirely of reprints from Wikipedia is, by definition, worthless. A lot has changed since five years ago, when Stephen Colbert could create the "fact" that Africa's elephant population had tripled in the last three months. The entries remain susceptible to vandalism, or to invasion by the chronically misinformed, but a substantial community of regular contributors and editors has developed that exercises a degree of control, and numerous studies show that its level of reliability compares favorably with other reference works.

Meanwhile, an interesting dialectic of popularity and authority is at work as major institutions begin to find it necessary to deal with the site, which recently celebrated its 10th anniversary. In May, the first Wikipedian in Residence began assuming his responsibilities at the National Archives. Around the same time, the Association for Psychological Science announced its Wikipedia Initiative, encouraging members “to participate by adding new entries and enhancing existing ones with more complete and accurate information with references.”

A few years back, universities were debating whether to ban citation of Wikipedia in student papers. The APS, by contrast, makes an appeal to “teachers and students who can make updating or creating Wikipedia entries part of coursework” as a practicum in learning “the importance of logic, strength of argument, flow and clarity of writing, and citations of the appropriate literature.” Wikipedia has undertaken a number of other initiatives to academe, as reported last month in Inside Higher Ed. And according to a paper published earlier this week, the online reference is being both analyzed and cited with some frequency in the peer-reviewed literature of several disciplines.

An interview with Frederick Forsyth on the 40th anniversary of The Day of the Jackal (Bloomberg):

It was Forsyth’s first novel, written in just 35 days at the start of 1970. He’d returned to a particularly frigid London, worn out from reporting on the Biafran conflict. Unemployed, sleeping on a friend’s couch and badly in need of cash, he sat down at his bullet-scarred portable typewriter and began bashing out a novel he’d conceived years earlier, as a “junior junior” foreign correspondent in Paris.

His job back then had been to trail de Gaulle in case he was assassinated -- which seemed a good possibility in the wake of Algerian independence. The young Forsyth figured otherwise.

“I was watching, and worked out in my head that the OAS were not going to get him. His security was too good and they were too amateurish. I thought to myself the only way they could get him is by bringing in an outsider.”

Four publishers turned the novel down, unable to see the point in a book about killing de Gaulle when de Gaulle was already in retirement. Where was the suspense? The point is to find out how close the Jackal gets, Forsyth says.

I wasn't active on the twitter over the past week but these are the items I may have clipped had I been:

Maps to most shopping malls: Bing Maps Go To The Mall

Publishers Weekly reports on ebook sales E Not Replacing P

Lexis deny they have plans to move out of Dayton after announcing a new Philipines facility DaytonDaily

Vonnegut library will ship banned book to Missouri

Landlord Agree tells SEC it is in default on loan for Borders Group headquarters

Naked Man Rescued from Missouri River Wanted to Float to Library of Congress

British Library offers e-classics app

Google Launches Citation Stats

Activist Investors Take Stake in McGraw-Hill

Borders Aims to Sell Brand Name, Website at September Auction

The pros and perils of ditching academic publishers

Informa sees signs of recovery in business-to-business publishing

And in Sports, ManUtd get things off to a winning start (Guardian)

Beyond the Book Visits The GooglePlex

A new “Beyond the Book” podcast from Copyright Clearance Center in which CCC’s Chris Kenneally gets a special tour of the Googleplex and speaks with Steven Levy, a senior writer at Wired and author of In the Plex, his book about Google. Levy began writing about Google in 1999 and for his upcoming book, he spent two years inside the Googleplex. “It’s really hard to imagine a company that has a bigger effect on us in our daily lives than Google does.”

In the book, Levy had to keep Google’s social network Google+ under a codename “Emerald Sea” because it wasn’t released yet. “… people at Google told me that they felt that this was the one epic fail…they’d done a lot of things right over the year…but one thing they didn’t do that would have been a smart thing to do would be to master the social networking aspect- to build people into their product, as they put it.”

Levy goes to describe the sales people in relation to the engineers. “Google had this odd relationship to its sales force -… they [knew they] were necessary, but didn’t consider them, in a way, equal to the engineers…the engineers are in the center of it. But they see the ads section as also an engineering center. They think they’re making innovative products in engineering.”

Right. Well, you know, of course, the company was founded, begun at Stanford, and many of the early employees came from that environment – that elite campus environment where, I guess, they work hard, they play hard is – is that about what it’s like at Google?

A: Yeah, it is. There’s two strains, I think, in the culture of Google that are really important. And one of them, as you say, is the university idea there. And it is very much campus-like, not only in the amenities but in how they argue things. The job interviews, some people say, are almost like defending your dissertation. You’ll go on there. And there’s a lot of colloquy and back and forth, and they try to keep it based on data.The other strain in the culture is – comes from, I think, the fact that both founders –Larry and Sergey – were Montessori kids. So there’s a streak of irreverence that go on there. They question authority. And it’s OK to ask any question of anyone –even the founders. And once a week they have a meeting – an all-hands meeting –where anyone can attend and ask any question that they want.

And of course Google has a system where people can submit things online and vote them up and down, but they can also ask questions directly. And sometimes the questions are quite pointed, straight at Larry and Sergey, and they don’t take it personally. They’ll try to answer the questions very straightforwardly, and no one really worries about whether you’re offending Larry or Sergey when you ask a pointed question. I remember I was at a meeting once – at a TGIF meeting – where someone asked, why does our CFO get so much money? Why do we have to spend so much money to get a chief financial officer? And Sergey thought for a minute, and he said, well, you know, basically we looked at it and we felt that this was the going rate for CFOs, and we wouldn’t get a good one otherwise. And the other person sort of stood down and said, OK, that makes sense and, you know, that’s a good answer there. And they go on to the next thing.

The podcast is available here:

MediaWeek (Vol 4, No 31): Financial resutls: Pearson, Wiley, Wolters Kluwer, Reed Elsevier

From Pearson's press release: Pearson sales up 6% to £2.4bn and profits up 20% to £208m* (Pearson)

Education sales up 9% and profits up 31%:

• Good sales growth in International (up 26%) and Professional (up 35%).
• In North America, sales 3% lower with tough first-half comparables; full-year growth expected with easing H2 comparables and further market share gains.
• FT Group sales up 7% and profits up 10%, enhanced by digital subscriptions.
• Penguin sales 4% lower (underlying sales level); profits sustained with rapid digital growth. Strong growth in digital, developing markets and newly-acquired businesses
• Education digital platform and service registrations up 15%;
• FT.com subscriptions up more than 30%;
• Penguin ebook revenues up almost 130%.Sales up approximately 40% in developing markets (headline growth).
• Strong growth from recent acquisitions including Wall Street Institute, SEB (Brazil), TutorVista, CTI (South Africa) and Melorio (now known as Pearson in Practice). Full year outlook upgraded
• Pearson expects sales and margin growth for the full year, based on good trading momentum - especially in digital businesses and developing markets - and easing comparatives.Pearson expects to achieve adjusted EPS of approximately 80p for the full year (2010: 77.5p). This guidance is struck at current exchange rates (£1: $1.63). Publishing: In Education, we expect continued growth in 2011. While we face tougher comparatives in International and Professional in the second half of the year, we expect our North American Education business to report full-year growth based on business won in the year to date and less challenging comparables in the second half. Our education business faces continued pressure from state budget weakness and slower enrolment rates in North America, and a generally weak public spending environment in many developed parts of the world. We are confident that rapid growth in our digital and services businesses – which help boost student performance and institutional efficiency - and in emerging economies can continue.Penguin is working through a period of significant industry change characterised by a rapid shift towards digital sales channels and digital books and intense pressure on physical book retailers, demonstrated most recently by the bankruptcy of Borders in the US. Penguin has performed well through these industry changes and, after a particularly strong competitive performance and financial results in 2010, we expect it to perform in line with the overall consumer publishing industry this year.

From June, John Wiley & Sons Announces Fiscal Year and Fourth Quarter Results (Wiley)

Full Year Revenue up 4% excluding FX (+3% including FX) Adjusted EPS growth of 15% excluding FX, the $0.10 third quarter charge related to Borders, and $0.17 impairment and restructuring charges related to GIT last year. U.S. GAAP EPS growth of 16% including FX (+19% excluding FX)Free cash flow (FCF) increased 25% to $270 million. Net debt (long term debt less cash and cash equivalents) reduced by $243 million during the year to $252 million. Fourth Quarter Revenue down 0.5% excluding foreign exchange (up +2% including FX) Revenue growth by segment excluding FX: STMS flat, P/T -4%, HE +6% Reported EPS flat over prior year including FX (-5% excluding FX) FY12 Outlook Expect FX neutral outlook of mid-single-digit revenue growth and EPS in a range from ($3.15 to $3.20) Operations Results:

SCIENTIFIC, TECHNICAL, MEDICAL, AND SCHOLARLY (STMS)

• Fourth quarter revenue flat excluding FX, +4% full year
• Fourth quarter contribution to profit down 0.8%, +5% full year, excluding FX and prior year restructuring and impairment charges
• Calendar year 2011 journal subscription receipts showing approximately 3% growth with 95% of targeted full year business closed at April 30, 2011, as expected.
• Full year 2011 digital revenue at 59% of total STMS revenue
• Full year 2011 digital book revenue up 74% and now accounts for 16% of total book sales

STMS revenue for the quarter was up 3% to $287 million, or essentially flat excluding foreign exchange. The soft performance for the quarter was as expected as a result of approximately $10 million of accelerated billings reported in Wiley’s third quarter. Due to improved processes for journal subscription licensing implemented for calendar year 2011, revenue for published journals was accelerated into the third quarter of fiscal year 2011. Excluding the timing issue, new journal subscriptions and new society business, backfile sales and eBook revenue drove the results for the quarter.

Direct contribution to profit for the quarter grew 2% to $131 million, or fell 1% excluding foreign exchange and a prior year $0.8 million impairment/restructuring charge. Including the impairment and restructuring charge, direct contribution to profit for the quarter grew 3%, or was essentially flat excluding foreign exchange.

STMS revenue for the full year was up 1% to $999 million, or 4% excluding foreign exchange. Top-line results were driven by increased journal subscriptions, new journal society business and digital book growth. Through April 2011, subscription receipts for calendar year 2011 grew approximately 3% over calendar year 2010. Direct contribution to profit for the twelve months, excluding last year’s impairment/restructuring charges of $15 million, rose 1%, or 5% excluding FX. Revenue growth and margin improvement due to outsourcing journal production and fulfillment was partially offset by higher operating costs from business growth. Including the impairment/restructuring charges, direct contribution grew 5%, or 9% on a currency neutral basis. PROFESSIONAL/TRADE (P/T)

• Fourth quarter revenue down 4% excluding FX; up 1% full year
• Quarterly softness due to Borders’ impact on consumer titles. Borders represented about 5% of projected P/T sales for fiscal year 2011. All other key customers showed growth.
• Fourth quarter contribution to profit down 2% excluding FX; up 5% full year, excluding the Borders bad debt charge in the third quarter
• Digital revenue at 10% of P/T overall. This is up from 7% in FY10.
• Fourth Quarter eBook revenue up 145% over prior year to $9 million
• eBook revenue for the full year up 127% to $23 million, or 5% of P/T revenue

Fourth quarter P/T revenue fell 3% to $110 million, or 4% on a currency neutral basis primarily due to the disruption caused by the Borders bankruptcy. Ebook grew 145% over prior year to $9 million. Weakness in consumer titles mainly due to Border's issues and a strong fourth quarter of the prior year due to the initial publication of Office 2010 titles were partially offset by strong growth in the business/finance category.

Direct contribution to profit fell 1% to $24 million for the quarter, reflecting top line results mitigated by lower accrued incentive compensation.

P/T revenue for the full year grew 2% to $437 million, or 1% on a currency neutral basis. Growth in business/finance and professional education was offset by lower consumer sales due to the Borders disruption. Excluding the Borders bad debt charge of $9 million ($6 million after-tax) in the third quarter, fiscal year 2011 direct contribution to profit increased 5% to $105 million due to revenue growth and improved margins from higher eBook sales. On a reported basis, direct contribution to profit declined 5% to $95 million.

HIGHER EDUCATION (HE)

• Fourth quarter revenue +6% excluding FX, +7% full year
• Fourth quarter contribution to profit improved $2 million over prior year excluding FX, or $13 million,+15% full year
• Fiscal year 2011 digital revenue now 16% of higher education business, up from 13% in prior year
• Fiscal year 2011 non-traditional and digital revenue grew 26% to $84 million, representing approximately 27% of global HE revenue vs. 24% in fiscal year 2010.
• Annual gross margin up for third consecutive year due to increased digital-only sales

Fourth quarter HE revenue grew 8% to $48 million, or 6% excluding foreign exchange. Non- traditional and digital revenue sales in North America and higher School sales in Australia drove results. Sales of non-traditional and digital products were up 44%. Non-traditional and digital revenue includes WileyPLUS, eBooks, digital content sold directly to institutions, binder editions and custom publishing.

Direct contribution to profit for the quarter improved by $2 million, reflecting top line results and higher gross margins due to increased sales of ebooks and other digital products.

For the full year, HE revenue advanced 9% to $307 million, or 7% excluding foreign exchange reflecting growth in all regions. The results were driven by increased student enrollment, strong back-list sales driven by 25% revenue growth in non-traditional and digital products and a strong front list in engineering/computer science and science categories. Direct contribution to profit increased 17% to $101 million, or 15% excluding foreign exchange. Top-line growth, improved gross margin from higher digital revenue and cost containment drove the results.

Wolters Kluwer reported half year numbers (WK):

Highlights include strong operating performance, a strategic re-focusing of the Health & Pharma Solutions division, and reiterated outlook for 2011.

The information in this press release is based on continuing operations, excluding the planned divestment of the pharma business, unless stated otherwise.

Highlights

• 3% revenue growth in constant currencies to €1,619 million (1% organic) fueled by strong growth in electronic and service subscriptions which grew 7% in constant currencies.
• Online, software, and services now constitute 72% of total revenue.
• Ordinary EBITA up 3% in constant currencies (1% organic) supported by migration to higher margin electronic products and contributions from the Springboard program.
• Diluted ordinary EPS of €0.65 increased 2% over prior half year.
• Solid free cash flow of €131 million impacted by tax payments, on track for full-year guidance.
• Planned divestment of pharma business will focus the Health & Pharma Solutions division on leading market positions in professional information and clinical solutions; non-cash impairment charge of €106 million recorded as part of discontinuing operations.
• Full-year guidance for total Company reiterated for 2011.

Revenues grew 3% in constant currencies to €1,619 million, with organic growth of 1% (HY 2010: 0%). Legal & Regulatory revenues were in line with HY 2010, with organic growth improving markedly from -3% organic growth at HY 2010 led by strong results in North America. Tax & Acccounting revenues fell 1% organic, impacted by the restructuring of bank product revenue (2% of annual division revenues), which is expected to shift revenues into the second half year. Health & Pharma Solutions revenues grew by 9% in constant currencies (6% organic), driven by strong growth at Ovid and double-digit growth in Clinical Solutions. Financial & Compliance Services’ revenue growth of 17% (3% organic) was supported by double-digit growth in Audit, Risk, and Compliance (ARC Logics), strong performance from banking and compliance products, and global expansion through the acquisition of FRSGlobal. Emerging market results are advancing, with revenues in China growing with strong double-digit numbers.

Ordinary EBITA improved 3% in constant currencies to €325 million. The company improved profitability by the continued shift towards higher margin electronic solutions, diligent cost management, and the impact of the Springboard operational excellence program.

Reed Elsevier reported half year numbers (Reed):

First half underlying growth in all businesses

• Underlying revenue growth +1%, or +3% excluding biennial exhibition cycling
• Improving performance from large subscription and data businesses
• Cyclical businesses recovering
• Adjusted operating margin +1.3% pts at 26.6%
• Return to growth in adjusted earnings per share: +5%

Reed Elsevier’s Chief Executive Officer, Erik Engstrom, commented:

“The first half has seen the growth trajectory improve with our large subscription and data revenues strengthening and most of our cyclical businesses recovering.

Good growth in global scientific and medical research activity has supported spend on research information and tools. The risk business with its pipeline of new product innovation is expanding its data and analytics across insurance carriers’ workflow. In our legal businesses new sales continue to grow and our product and content enhancements are resonating well with customers. Our exhibitions are demonstrating the value of their offering with strong growth in the annual shows and a further acceleration of the new launch programme. Reed Business Information has returned to underlying revenue growth and delivered its highest margin in recent history, as it continued to focus the portfolio on high growth data services and online marketing, and increased the efficiency in its operations.

With positive momentum across our businesses, we continue to expect a gradual improvement in performance.”

Elsevier (44% of adjusted operating profit)

• Revenue growth +2% (+2% underlying), adjusted operating profit +5% (+4% underlying), at constant currency
• Growing research activity supporting science and medical research related spend
• Health Sciences: good growth in electronic solutions offset by continuing weakness in European pharma promotion, print books and US career school enrolments
• Budget environment mixed; varies considerably by geography and customer

LexisNexis Risk Solutions (23% of adjusted operating profit)

• Revenue growth +3% (+4% underlying), adjusted operating profit +5% (+6% underlying), at constant currency
• Strong growth in insurance data and analytics (+7%) supported by new product pipeline
• Growth across all of business services, government and screening solutions; varies by market
• Insurance software licence business -25% (£7m/€8m); carriers postponing enterprise systems purchases

LexisNexis Legal & Professional (12% of adjusted operating profit)

• Revenue growth -1% (+1% underlying), adjusted operating profit -4% (-2% underlying), at constant currency
• Return to underlying revenue growth; adjusted operating margin flat
• Legal markets stabilised but recovery in activity levels muted; new sales growing, content and product enhancements resonating
• Strong growth outside US in online services largely offset by print declines

Reed Exhibitions (15% of adjusted operating profit)

• Revenue growth -3% (-4% underlying), adjusted operating profit -7% (-8% underlying), at constant currency
• Underlying revenues +10% excluding impact of biennial show cycling
• Strong growth in annual events across all geographies
• Expanded launch programme with over 40 new launches expected for the full year

Reed Business Information (7% of adjusted operating profit)

• Revenue -8% (+2% underlying), adjusted operating profit +32% (+12% underlying), at constant currency
• Return to underlying revenue growth; adjusted operating margin up 4.7% pts to 15.4%
• Strong growth in data services and online marketing solutions
• Leading brands returned to growth in the first half; continuing difficult print advertising markets in other business magazines

Where Am I? LinkedIn, Twitter, Flickr, Google+, All of the above and more.

Networks are now so obvious. In the long ago past – about 1997 – we carried our networks around in our heads, diaries and phone books or club memberships. Sometimes other people may have had a better idea of our networks than we did – like your wife, parents or secretary, but that’s no longer the case.

I’m still understanding Google+ and not because it is so complicated but because I wonder at my investment. I jumped on LinkedIN and Twitter quite early on because, in both cases, I saw immediate personal utility. The ‘network’ aspect offered an interesting side benefit. In the case of twitter, while I enjoy my use of the service, which I would describe as a cross between delicious tagging and news broadcasting, I remain dissatisfied that I only have limited control over my networks. In contrast, other networks, in particular Facebook, have been failures for me perhaps because I am either uneasy mingling my networks or haven’t found a utility that solves a problem (at least for me). What is clear to me, is that investing in the application is critical to maximize any benefit and, this is where my problem presents itself. How many of these networks can you maintain properly without becoming dissatisfied, frustrated or under-whelmed? And underwhelming to others?

One of the odd things about Google+ has been the amount of people who have added me to their circles when I have no idea who they are. Some of this may have to do with the pseudonym issue: On other networks such as twitter they might use a handle other than their real name. What is the etiquette here? Am I supposed to add all of these people? At least with LinkedIn you have an ability to ask the person where they know you from before you add them to your network. Maybe I should have a circle tagged “anonymous” or “unknown”. Some, perhaps many of these ‘contacts’ may be readers of this blog which has a wide distribution via RSS. Unfortunately, I have no insight into my RSS population other than a subscriber number and the knowledge the number increases every week. I really wish I knew who these people were.

Recently, I went through the exercise of matching my outlook contacts, LinkedIN, twitter and Flickr networks. It was a curious exercise. I have approximately 2,000 contacts in my outlook address book. About 50% of these were not found/matched in LinkedIn. This was particularly surprising to me since both contact lists are ostensibly ‘business’ related and therefore inherently linked. In my small use case, the exercise may also indicate that LinkedIn could have a lot of upside. Of the matches in twitter, I could only find about 20% of my contacts had twitter accounts. In the case of Flickr – which I use a lot – of my 2,000 outlook contacts less than 20 had Flickr accounts and in most of these cases the accounts were basically dormant. In the case of the latter two networks, it is likely that many people are not using their business email to register with all networks. This complicates an exercise like the one I went through. LinkedIn has tried to address this by allowing more than one email address; however, I don’t see this as an effective mechanism. (It works functionally but not in a practical sense for the users).

Which brings me back to Google+. There are some features of the service which will be useful but I will need to invest time to understand and make use of it. In the meantime, I continue to manage my other networks as best as I can. Please join me but don’t be shy about introducing yourself.

Here are my networks:

LinkedIN

Twitter

Flickr

Blogger

Google+

I have no idea what to do with Tumblr.

United the logo of Continental

I learned to love Continental Airlines although it was hard at times – particularly when I was forced to cab it to LaGuardia to avoid their monopoly pricing on certain routes, but all in all the experience of travelling via Continental airlines has grown comfortable and predictable over the years. Perhaps I have modified my expectations but as any frequent traveller will tell you flying is not at all a glamorous experience. It has probably never been for any who started flying in the early 1990s. I’ve never been much of a United Airlines customer and I wonder how the merger of Continental and United might negatively impact my travel experience.

Gaining trust and ‘comfort’ with a brand represents a complicated dynamic and in their plans for integration, there’s no doubt significant time has been spent on allying all manner of fears their customers will have over the merger. The combined airline will be named United but will use the Continental livery – the color pallet, fonts and the Continental tail fin image. In this effort, which reflects I think their entire approach to the merger, management has taken the worst of all possible alternatives. Firstly, the word “Continental” connotes a far more expressive and international travel image than the word “United”. This is not because I am biased but “Continental” is aspirational, it reflects a big picture view of travel. “United” on the other hand has more to do what they are doing – uniting two transport companies – than to what they are offering customers. I can image the two management teams sitting in a big conference room agreeing to use “United” to make them all feel like a team. Sadly, nothing to do with what the customer may feel about the new airline.

The same is true of the “new” corporate strip. The Continental logo looked old and dated ten years ago. Oddly, while bland, the new United strip that they were in the process of rolling out prior to the merger looked more up to date. But that’s been cast aside in process as has brand strategy.

The combination of the two branding efforts has created a new corporate image which is jarring to anyone familiar with either company. It neither takes the best of each, nor inspires existing customers to expect a new and improved experience from the combination. The merger team has missed an opportunity, in a very basic way, to excite their customers (me) and, I fear this lack of inspiration will color the entire United/Continental merger effort.

MediaWeek (Vol 4, No 30): Arundhati Roy, JSTORE Illegal Downloads, Kaplan's $1.6mm Bill, High Journal Prices, Three Rules of Reviewing + More

The New Statesman has a long feature article on Arundhati Roy and this is only a small sample (NewStatesman):

Roy has not published any fiction since The God of Small Things, much to the impatience of the six million people who bought that book (and, you imagine, her agent David Godwin). Over the past 14 years, she has instead devoted her energy to India's most urgent political challenges: nuclear tests, dams, Kashmir, Hindu nationalism, terrorism, the emergence of a super-wealthy elite and the 800 million citizens who still live on less than Rs20 (30p) a day.Roy's version of India is uncompromising. The country, she says, is in "a genocidal situation, turning upon itself, colonising the lower sections of society who have to pay the price for this shining India". Its leaders are "such poor men because they have no idea of history, of culture, of anything, except growth rates". The prime minister, Manmohan Singh, is a "pathetic figure as a human being". Democracy is thriving "for a few people, in the better neighbourhoods of Bombay and Delhi". The Indian elite are "like an extra state in America". The country has a defence budget of $34bn this year. "For whom?" she asks. "For us." In her account, there is a war taking place, not with Pakistan or China, but within India's borders: the sham democracy has turned on its poorest citizens.

Activitst and technology innovator Aaron Swartz faces 35yrs in jail for illegally accessing and downloading millions of articles through the JSTORE account at MIT. (Clearly, a speed reader). Inside HigherEd takes a look at the charges (IHEd)

Swartz has been involved in numerous efforts to make more information available free to more people. But the charges he faces make no distinction between his possible philosophical goals and any other kind of theft. "Stealing is stealing whether you use a computer command or a crowbar, and whether you take documents, data or dollars. It is equally harmful to the victim whether you sell what you have stolen or give it away," said a statement from U.S. Attorney Carmen M. Ortiz. While Swartz could not be reached for comment, his many fans mobilized support online, charging that the government was essentially treating him as a criminal for violating the terms of service in place at MIT and with JSTOR members. More than 15,000 people signed petitions on his behalf within hours of word of the charges he is facing. The blog of Demand Progress -- a group Swartz previously led as executive director -- published a statement saying that "he is being charged with allegedly downloading too many scholarly journal articles from the Web. The government contends that downloading said articles is actually felony computer hacking and should be punished with time in prison."

The Chronicle blog Wired Campus notes the move by research libraries UK to take a more aggressive stand against 'high journal' prices with particular attention paid to Elsevier and Wiley. This activity stems from a report commissioned by the group in November and a subsequent journal article published in March, 2011. (Wired Campus)

David C. Prosser, executive director of the association, said it is pushing for a reduction of 15 percent in the cost of Big Deals, and that it focused on Elsevier and Wiley because those contracts expire at the end of 2011. “It was a slow and gradual realization” that they had grown too expensive, he said. “There are many benefits to the library community of the Big Deals. So for quite a while, those benefits were outweighing the major concerns.” But like their counterparts in the United States, British research libraries have endured financial strains lately. In Britain that included not only the global recession and a major reorganization of higher-education financing but a crash in the value of sterling in 2008. Mr. Prosser said that hurt libraries in Britain because they pay most of the larger publishers in euros or dollars, not in sterling.“So we lost hundreds of thousands of pounds of buying power overnight,” he said. “That was the point at which people began saying, ‘We’re tied into things over which we don’t have a lot of control.’” According to Mr. Prosser, Elsevier and Wiley have both proposed deals with new terms, but neither comes close to satisfying the group’s conditions. “We are having to reconcile ourselves to the fact that we may not be able to reach a deal,” he said.

From Dow Jones: A Kaplan school has agreed to pay $1.6mm in fines related to a whistle blower case on fraudulent enrollment practices. The wire report also notes the resignation of two senior Kaplan executives (DJ):

The suit was initially brought by David Goodstein, the campus's former director of education. The U.S. Department of Justice contacted Kaplan about the program in 2008, according to Washington Post securities filings.Under the settlement, CHI will make total payments of $1.6 million. An attorney for Goodstein said in a press release that the payment includes $1.13 million for the federal government and just under $500,000 to satisfy student loans of program participants. Goodstein will receive a percentage of the government's settlement amount. The campus had been the focus of other investigations, including a program review by the Education Department.Earlier this week, Kaplan said that the chief executive and chief financial officer of Kaplan Higher Education were resigning. The organization is shifting many services provided by that unit into two separate institutions--one for campuses and the other for its online operation.

Here is the corresponding press release from Kaplan on the executive changes:

Kaplan, Inc. Chairman and CEO Andrew Rosen today announced a more cost-efficient organizational structure for Kaplan Higher Education (KHE). This change will reallocate resources to preserve and enhance quality student services and academic innovation, while streamlining general and administrative activities. Most centralized services provided under the KHE umbrella will be shifted to the units that house its two separate types of institutions—the Kaplan College/Kaplan Career Institute campuses, and Kaplan University. Some centralized services will move to Kaplan, Inc. The KHE administrative infrastructure will essentially disappear. Jeffrey Conlon, who has served as Chief Executive Officer of Kaplan Higher Education since 2009, will be leaving his post. Conlon has been with Kaplan since 1993, first in its Test Prep division. He joined Kaplan University in 2004 and became President of its campus-based schools in 2005. He took over as president of Kaplan Higher Education in 2008. “During his tenure, Jeff has been instrumental in improving student outcomes, raising academic standards, and introducing the bold Kaplan Commitment initiative, which helps ensure that our students are making well-informed educational choices,” said Rosen. “He has been an important part of Kaplan for many years, and we owe him a deep debt of gratitude.” As part of the restructuring, Lionel Lenz relinquishes his role as chief financial officer for KHE. Lenz joined Kaplan in 2009 and has earned a reputation for managing complex operations to support large-scale growth.

Scott McLemee in Inside Higher Ed takes a view on the changes in book retailing (IHEd):

But schadenfreude at corporate misfortune is, in this case, a bit shortsighted. The impact of “restructuring” the retail book and magazine trade (to use the blandest possible term for this wave of creative destruction) goes beyond the obvious immediate effects on consumer behavior. A revival of independent bookselling is the least likely outcome, at least in the short run. Rather, the shrinking number of outlets for hardbacks and paperbacks will create a greater incentive for publishers to emphasize e-books. (As if wiping out the expense of putting unsold copies in a warehouse were not enough.) The tendency is likely to be self-reinforcing: the easiest way to get an e-book is from an online vendor. Last summer, a prominent cyberpundit predicted that the printed book would be “dead” as a major cultural form within the next five years. This seems a little less preposterous all the time.

There are three rules of book reviewing - once you get past the introductory passages on how nasty you can be (Slate):

In that old style-sheet, put together when books and newspapers were in their heyday, I found the three principles that have guided me ever since as a writer and as a reader. Of course, this three-part Golden Obligation may be filled compactly, on the way to essayistic arguments and insights, as in many a Slate piece. Great models like G.B. Shaw's music reviews or Max Beerbohm on theater are great because they show how to do the essentials, then get quickly beyond them, in ways that are fun to read.Every book review, said the anonymous document, must follow three rules: 1. The review must tell what the book is about. 2. The review must tell what the book's author says about that thing the book is about. 3. The review must tell what the reviewer thinks about what the book's author says about that thing the book is about.

And in sports, Tiger proves he still has something left to surprise us with (in a nasty way) NYT From the twitter: BBC News - Author Lee Child wins top crime award Documentary about graphic designer Milton Glaser. BrainPickings BeyondChron: Open Letter to AG Holder: Don’t Let Authors Guild Hijack “Google Books” and “Freelance” Copyright S'ment Chron Prospect of privatizing Toronto’s library sparks outcry Globe&Mail WSJ.com - Macmillan Fined Over Africa Contracts Fraud RLPC-Charterhouse gets 500 mln euro loan for BvD buyout Reuters Move to seize David Hicks' book cash will test US military conviction NewsCO

MediaWeek (Vol 4, No 29): Library of Congress, Bertelsmann, Michelin Guides, Bookstores, P.G. Wodehouse, Education Funding Report + More

There's a documentary on the Library of Congress on CSPAN this evening (7/18):

This program looks behind-the-scenes at the Library of Congress, allowing viewers to learn the history of the institution as they tour the Library’s iconic Jefferson Building and see some of the treasures found in its collections of rare books, photos, and maps. It will also feature a look at some of the presidential papers housed there, ranging from George Washington through Calvin Coolidge. Viewers will learn how the library uses technology to preserve its holdings and expand public access to them. It will also show how technology is helping to uncover new information about some of the items in its collections.

From the FT a short interview with Bertelsmann's Hartmut Ostrowski (FT):

While BMG blossomed from an apparently inauspicious rump of Bertelsmann’s first music publishing unit, which was sold to Universal in 2006, education has proved no more than a mantra for several years.

“We’re patient enough for the right opportunity to come along,” says Mr Ostrowski, although he will not say whether this might be soon or “in two or three” years’ time. “We also know we’ll need patience until the business grows to any appreciable size,” he adds, suggesting that any first step could be small.

And again from the FT, a look at the prospects for The Michelin Guides (FT):

Michelin stresses though that when taken together, the maps, guides and digital businesses are profitable. But the losses incurred by the red books have become such a concern that Michelin has turned to outside consultants. Accenture looked last year at three different scenarios for the red books, including outright closure.

The nuclear option was quickly rejected, partly in recognition of the undoubted brand value of the guide but also because of the political impossibility in France of such drastic action. However, Accenture warned that to carry on with things as they are today would mean yearly losses at the guide hitting €19m by 2015, representing a cumulative loss of €70m over the next four years.

As a result, the consultants proposed a new business plan that would allow Michelin to make money by offering online “services” to the hotels and restaurants included in the guides.

The thinking seems to be that Michelin would do well to seek a share of the good fortune that its awards bestow on restaurants, possibly by creating a “red book” website that provides paid-for links for those establishments with Michelin stars and allows users to make online reservations.

From Intelligent Life: Goodbye to Bricks and Mortar booksellers (IL):

Like Barnes & Noble, Borders has a reputation for being a brutish corporate behemoth that has been edging out more humane book-selling competition for decades. Isn’t this just a story of comeuppance? But as we noted in March, these colossal book empires have also played an important role as often lone bookstores in small American towns and suburbs. where readers may otherwise be limited to what can be found at Wal-Mart. A friend and former colleague who grew up in Texas often bristled when New Yorkers kvetched about stores like Borders. When one of these multi-storey bookstores moved into his home-town, he couldn’t believe his luck. Urban centres can be counted on to provide affable places to buy tomes, flirt with bookworms and listen to visiting authors. Elsewhere it is stores like Borders that have provided a rare, atmospheric and pressure-free space for bibliophiles, often in strip malls next to a Home Depot.

A lost letter from P.G. Wodehouse may shed light on the genesis of Jeeves (Telegraph):

The letter appeared in the celebrated Conning Tower column written by Franklin Adams, a friend of several members of the Algonquin Round Table coterie. The section regularly featured the contribution of famous names such as Noel Coward, Dorothy Parker and Groucho and Harpo Marx.

The newspaper added a title — “Grantland, Priceless Old Bean, Is Off in Florida, But He Shall Ever So Well Be Spoken To, We Mean To Say” - that could also have come straight from the pen of Wodehouse.

The author was living in America at the time the letter appeared in Jan 1920, by when had published just five short stories in the Jeeves cannon. Although all the protagonists are long dead, meaning a definitive verdict on the letter’s provenance is probably impossible, there are compelling indications that it was written by Wodehouse.

From The Foundation Center (via FullText Reports): Moving Education Reform Forward: Grantmakers Reflect on a Convening with State and Local Government Education Leaders

This issue brief provides critical insights into how education grantmakers (and foundations in general) may be able to work more effectively with state and local education leaders. Based on interviews with participants at a national gathering convened by the Council of Chief State School Officers in January 2011, it offers a nuanced assessment of this type of convening, including the challenges that face grantmakers and education leaders in their work to coordinate future efforts effectively.

From The Twitter this week: Why Content Isn't King - The Atlantic Harry Potter, Inc: How the Boy Wizard Created a $21 Billion Business - The Atlantic FT: Follett is being shopped - Retained Credit Suisse FT BBC Worldwide reports record underlying profits Guardian Collins buys A&R WA bookstores - The West Australian

FT: Follett is being shopped - Retained Credit Suisse

According to the FT, the privately owned Follett company may be in the process of selling itself (FT):

Follett Corporation, the private River Grove, Illinois-based educational publishing company, is in the midst of a sale process, two industry bankers told dealReporter.

It is not clear whether the company is selling one of its six divisions or the corporation as a whole, the bankers said. Follett did not respond to requests for comment.

Credit Suisse, which declined comment for this story, has been retained to advise Follett as it looks at options, one of the bankers said.

The company plans to hold management presentations at the end of July with potential suitors, the second banker said. He said he thought the company must have had an initial round with a “select group” of bidders. Follett generated USD 2.7bn in revenue last year, according to its website. The company appointed Chuck Follett acting CEO 12 months ago.

The article is sparse on details however they admit that neither the company nor the bank has responded to requests for comment. Silly acquisition possibilities are suggested but no one really knows who would be interested in either the entire company or selected parts.

This brings yet more unneeded uncertainty to the book retail channel.